Covid-19’s impact on the real estate market should only be felt on the short-term

Covid-19’s impact on the real estate market should only be felt on the short-term

For the near future, a continuous environment of low returns is expected, stated CBRE in its report "The potential impacts of Covid-19 on European Real Estate". However, it is expected a «strong recovery for investment during this year’s second semester». And, thus, on the long-term, the impacts on this market should be minimum.

For now, the current restrictions to entering the Schengen area, might condition the arrival of Asian investors to the real estate market. On the other hand, transactions are taking place «slowly».

These are the two immediate effects of the current situation on real estate investment. For the different segments, CBRE predicts different impacts.

Office rehabilitation might be conditioned

The undergoing projects to refurbish offices and new developments might be affected by the crisis, given the restrictions in terms of transport of goods. According to the document, recent corrections on the stock market might also lead to a change in the companies’ behaviour in terms of expansion in the short-term.

Retail and Hotels are affected by the decline in tourism

The hotel and retail segments will also be affected since both are highly dependent on tourism, which in the near future will decrease exponentially in the main European cities, as is already happening in Madrid and in Lisbon.

On these segments, the immediate impacts are already being felt, with the cancellations and reschedulings of opening and closing hours in shopping centres. But for the mid-term, CBRE draws a different scenario, of pressure and uncertainty.

Whereas for retail, CBRE predicts the current situation should increase the pressure already felt due to the growth of e-commerce, for the hotel segment the consultant recognises that the current demand for organized trips might directly depend on the individuals’ risk perception, as well as on the government’s measures.

Logistic: market destabilisation might be an opportunity

The logistic segment may also suffer repercussions with this scenario. CBRE mentioned that the current restrictions to the transportation of goods may lead some units to be shut down or dislocated, which can cause long-term impacts on the segment. On the other hand, the market’s destabilisation may also boost regional investment in the segment.

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